“DiggAds is powered by a complex auction-based system that attempts to serve users with the highest quality ads — Digg assigns its own quality score to ads — while factoring in the advertiser’s bidding price. It’s like Google Adsense but with quality scoring. The idea is to reward high quality ads with lower CPCs; the more diggs an ad gets the less the advertiser pays.”

“In the first four months, DiggAds has been extraordinarily successful for Digg. From a revenue perspective, things have been great — we view this as a positive sign that giving users control over the advertising they see is a good user experience.”

“Social networking behavior — endless repetitive page views, unvetted content — isn’t a great fit for traditional forms of online advertising. Early attempts to bring search or brand ads onto sites like MySpace and Facebook had pathetic results compared the trajectories of the sites’ popularity and attention. But now, a few years in, social media companies are starting to discover how to advertise to their own audience. And in the last five months, Digg has figured out a model that makes sense. So much so that its new site-specific ad formats already account for more than a third of its revenue.”

Earlier this month GE brought its HealthyMagination campaign to Digg. One aspect of the campaign encourages the Digg community to share health-related stories with others by drawing attention to the sharing features (and GE’s logo) at the bottom of each health headline on Digg.

And the approach is earning GE some praise from the notoriously tough crowd at Digg.

A Digg reader posted a screenshot of the GE sponsorship to Imgur.com and submitted the image (with his commentary) back to Digg: “New UI feature for digg.com debuting early? I think it’s a classy and non invasive way to feature revenue generating links.”

Another reviewer, the author of the respected brentcsutoras blog, reminds his readers that on other occasions he’s come out as a critic of ad integrations on Digg — before going on to say that he’s impressed with the tastefulness of the GE program:

“Clean, non-intrusive or annoying, the click-able banner takes you to a pretty cool landing page off HealthyMagination, which is GE’s attempt to help people become healthier ‘through the sharing of imaginative ideas and proven solutions’ by helping gather, share and discuss healthy ideas…. I have to say I am rather impressed with GE and their use of social media.”

The brentcsutors blog isn’t just respected by its readers like me, either. It’s highly regarded by Google’s PageRank algorithm too. Here’s how that benefits GE. Right now when a user goes searching for that high-profile socially-curated news site called “Digg,” Google returns brentcsutors’s favorable review on the first page of results.

GE has gone one better than “positive association with the Digg brand,” it has literally inserted itself into the online conversation about Digg.

Extending its sponsorship of Creating an association with the 2010 Vancouver Olympics and extending it into social media, Lexus teamed up with Digg (my employer) to build a vertical content section, that pulls together the most Dugg Olympics stories, pictures and videos as they gain social-media popularity.

Lexus banners also run alongside all Olympics-related stories elsewhere on Digg, some of which pull the latest, most popular Olympics headlines into Lexus-branded banner ads.

So here’s something I don’t get. NBC expects to lose $250 million on the Olympics. If I understand the phrase correctly, this is what’s called a “loss leader,” something that doesn’t make financial sense on its own, but it’s worth the expense because of some longer-term or peripheral benefits. An investment that, say, attracts viewers to your brand and convinces them that you’re so wonderful they should spend more time with you, check out your other products (eg, websites and cable networks), and tune into your other shows.

So why is NBC losing tons of money AND alienating younger viewers by making the online Olympics experience significantly less robust than their online coverage of the 2008 Beijing Olympics?

“When we roll out our digital coverage, there are some financial considerations to take into account. We make a massive investment when we acquire and produce the Olympics. The lions’ share of advertising revenue continues to be generated by our television coverage.”

NBC’s ratings last night were terrific — the Olympics beat out American Idol. Given that the average viewer of network TV is now over 50, though, I wonder if NBC should be using their investment in the Olympics to build a brighter, more digital future.

TechCrunch reported its traffic numbers for 2009. Google is still the #1 source of traffic to the site, bigger than direct traffic. Digg, Twitter and Google Reader round out the top 5 sources:

“Google search is the single biggest source of traffic, although it decreased from 37.3% in 2008 to 29.6% in 2009. Direct traffic is second, at 24% in 2009 (v. 25.3% in 2008). Then there’s a big drop to Digg (5.1% in 2009, 5.3% in 2008), Google sites (Reader, etc. (3.18% in 2009, 4.2% in 2008) and Twitter (2.9% in 2009, 1.2% in 2008). Feedburner, TechMeme, Facebook and Hacker News rounded out the list of top referrers in 2009.”

It’s interesting to see that Facebook doesn’t make the top 5. I’m also surprised that Twitter represents such a small percentage of total traffic, given TechCrunch has more than 1.3 million followers in Twitter. But, hey, I’m not complaining: I love to see that Digg remains TechCrunch’s biggest source of traffic after Google.

A friend recently asked the experts at ChasNote what Coke means by “enough for your meal” in these billboards running in California. A tough question to answer, isn’t it? When is 100 ounces really enough? What if your meal is the world’s biggest bag of Doritos?

“[A year ago] a Pew Internet and American Life Project study found that 20% of online adults 45-54 years old (the ‘younger’ Boomers) and 10% of online adults 55-64 (the ‘older’ Boomers) were participating in social networks…. Boomers are, in fact, joining and participating in social networks. Deloitte late last year found that 46% of Boomers maintain at least one social networking profile — up significantly from 2007.”

“But the Digg Dialogue is different. In essence, Toyota’s U.S. boss is laying himself out before the site’s 40 million rowdy users, any of whom have a chance to ask him — in no uncertain terms and in a most public forum — WTF?